AWEA: Wind Energy Cost Competitive with Natural Gas

One of the big knocks against alternative forms of energy is that they are not cost competitive to more traditional counterparts. However, the American Wind Energy Association (AWEA) now contends that wind energy generation costs about the same as natural gas.

Experts have suggested that natural gas, with its apparently smaller climate impact and widespread availability within the United States, could temporarily replace coal on our way to a cleaner energy future. But recent reports have called some of gas’s benefits into question; could the economics and the science suggest a coming turn against the so-called “bridge fuel?”

[AWEA’s director of industry data and analysis Elizabeth] Salerno points to several recent power purchase agreements where wind power has been sold in the surprisingly low range of five to six cents per kilowatt-hour, as well as independent industry data, to suggest wind’s growing competitiveness with natural gas. The government, though, doesn’t quite agree on the claim of cost parity: the most recent Energy Information Administration estimates place the cost of a new onshore wind installation at 9.7 cents per kilowatt-hour, and a new advanced cycle natural gas plant at 6.3 cents per kilowatt-hour.

“Cost parity is the holy grail of renewable energy,” says Michael Livermore, executive director of New York University’s Institute for Policy Integrity. “But there is cost parity with subsidies, and there is cost parity without subsidies. If this is happening without subsidies, then that means that wind power is going to explode, regardless of what the government does. I doubt that’s what really is going on.”

AWEA’s statement of competitiveness with natural gas does include the federal incentives for wind power, primarily the renewable energy production tax credit. The credit can lower the price of wind power by 2.2 cents per kilowatt-hour, and is currently set to expire at the end of 2012. Including this straightforward subsidy, and excluding various other factors from the wind power economics equation can lead one to make the claim of cost parity, some experts say.

Wind energy proponents say they need more consistent government policies … and less federal incentives for the petroleum industry … to stay competitive.